JOHANNESBURG - The Industrial Development Corporation has disputed media reports that it will lose money in its deal with Gupta-owned Oakbay Resources.
The IDC, which has loaned the company R250-million, will reportedly lose close to R100-million.
The IDC refutes this, despite OakBay's share price having tumbled from R9 to R5.80 just before it was suspended on the JSE.
IDC divisional executive Abel Malinga said: “Yes, there will be a write-down, but it doesn’t become a loss until such time that we dispose of the asset. There have ben discussions with the company to minimise losses to the IDC.”
The restructuring of the loan -- changing the interest on the loan into equity in Oakbay _ a few years ago raised eyebrows.
Malinga said that Oakbay had so far paid back R212.5-million.
“The capital is being serviced and is secured by the assets of the company … we are more than covered to recoup that outstanding amount.”
But the IDC is now stuck with shares that aren’t really liquid. The market capitalisation for Oakbay prior to the JSE suspension was nearly R17-billion; it now stands at R4.6 billion.
The company cannot pay dividends because it is not making money due to a slump in commodities.
Makoe Masilela, a portfolio manager at stockbroking firm BP Bernstein, said: “You cannot invest in a company that has a negative PE of almost 98 return on equity of negative 13. The same applies to return on assets of negative 13 …"
Masilela said the IDC probably didn’t have much of a choice but to convert part of the IDC loan to equity.